Conventional wisdom has long held that companies cross-listing their shares on exchanges in London, Tokyo, and the United States buy access to more investors, greater liquidity, a higher share price, and a lower cost of capital. In the 1980s and 1990s, hundreds of companies from around the world duly cross-listed their shares.
Yet this strategy no longer appears to make sense—perhaps because capital markets have become more liquid and integrated and investors more global, or perhaps because the benefits of cross-listing were overstated from the start. From May 2007 to May 2008, 35 large European companies, including household names such as Ahold, Air France, Bayer, British Airways, Danone, and Fiat, terminated their cross-listings on stock exchanges in New York as the requirements for deregistering from US markets became less stringent.1 These moves represent the acceleration of an existing trend: over the past five years, the number of cross-listings by companies based in the developed world has been steadily declining in key capital markets both in New York and London (Exhibit 1). On the Tokyo Stock Exchange, too, some well-known companies, such as Boeing and BP, have recently withdrawn their listings.
Whatever benefits companies might once have derived from cross-listing,...